Romney: Let's get rid of estate taxes because dodging them is too much work and too pricey

Politics & Elections
81
  1. Calling it the “death tax” is tantamount to admitting you’re not interested in an actual discussion.
  2. Repeating some politicians’ bombast in no way constitutes an argument, and Romney’s isn’t one. Rather, it endorses the OP’s characterization.

Now, do you wish to address the morality and actual consequences of being bestowed with large, unearned windfalls or don’t you? :rolleyes:

More evidence that you’re not willing to discuss reality. The “market” is hardly the same for someone starting with a million as for someone starting with zero. Please try to be serious sometime.

According to your logic, people who inherit wealth will be entitled, arrogant, “lazy little shits”. So, they’d probably be at a disadvantage, right?
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If you understood the logic, or were interested in anything other than repeating Romney campaign bombast, you’d realize that kids growing up *without *the expectation of having all their needs taken care of will *not *turn out that way. But the policy you advocate certainly does have that effect. So why do you want it?

82

Had the farm owner sold the farm on the open real estate market (even to his own kids), the proceeds still would have been taxed as income. Except then the exclusion would not have been 1 million, it would only have been something like $250k.

If the children were working the farm, why didn’t the owner put their names on the deed to the farm? If it’s one of those things where the kids went off and left and had no interest in the farm… the farm would likely have been liquidated anyway.

In this area, inherited farms are almost always sold. Not because of taxes, but because the kids WANT THEIR MONEY!

83

The family farm legend has been a favorite chestnut of the GOP’s campaign to end the inheritance tax. It touches all the traditional heartstrings, but is more likely the product of Frank Luntz than Frank Capra.

Unfortunately they have never been able to come up with a single actual example. So permit me to express some slight skepticism about the claim here.

84

I’ve butted heads with you before, but credit where credit’s due: that’s an awesome line.

85

I really don’t get the “Set a tax that is paid by all, not just those lacking good lawyers.” thing. Especially after you agree that no law will ever protect those who don’t plan ahead. All laws work against those who have no way to hire a lawyer, even traffic laws. You’re essentially saying, let’s make a law that isn’t a law.

Does one of your relatives have more than $5 mil and no plan to funnel it to you properly? Anyone dealing with an estate of more than $5 mil needs a lawyer and an accountant and not just to protect someone else’s inheritance. Without them, they’re going to be losing their own money, now.

Regarding the “death tax” - my Mom died this last May. Her estate may have to file an income tax form, because she had CDs that will earn interest during probation. Probation will continue until after her house sells. I doubt that there will be any income tax to pay and there will definitely be no estate tax.

There was no estate tax when my Dad died. No estate tax when all four of my grandparents died. No estate tax when my uncle who was fairly well off died. Many deaths - no taxes. Not a death tax. Not a Fear the Horrible Death Tax! Not a Hideous Undead Lurching Death Tax! Not a Screw Your Family, You’re Dead and Can’t Protect Them Now Death Tax! Just an estate tax that doesn’t apply to most estates.

And, actually, if the estate did qualify to be taxed, as Mom’s exectuor, I’d see that it was paid. In fact I’m kind of weirded out about the whole no income tax on inheritance thing. I had no idea about that.

Of course, I’m assuming that I’ll have to pay income tax on her accounts that are POD (Pay to beneficiaries On Death). That will feel more normal.

86

Good to know that right off the bat, I can take your opinion with a grain of salt. I really didn’t want to waste my time with anyone who refuses to listen to reason, unnecessarily demonizes the other side, and feigns ignorance for the sake of scoring cheap political points.

87

Wait, what?

$5 million exemption?

Why yes,that seems correct

You mean to tell me that people are actually bitching about this?

So Debaser, just to get things straight, you’re bitching and complaining on behalf of not just the 1% wealthiest people in the country, but actually you’re bitching and complaining on behalf of the wealthiest 0.6%.

No, scratch that. That figure is back when the exemption was 2 million dollars. It’s now 5 million. So you’re bitching and complaining on behalf of fewer than the wealthiest 0.5% of the country.

And Romney appears to be miffed that these 0.5% of the wealthiest in the country are forced to employ tax lawyers and accountants to find methods to avoid paying what they are supposed to. What a hardship that is for him and people like him!

88

I saw that site about $5 million, but I saw other that saying that amount is set by legislation that will expire at the end of this year. Unless there is some Congressional intervention, the exempted amount will revert back to 2002 levels, which is where the $1 million figure I used upthread came from.

89

Those 99.5% are just so entitled!

90

No…The point is “equality of opportunity”. That is a phrase that is used a lot…and, frankly, this country is so far from having equality of opportunity that it is sort of a joke. But, one of the few things that pushes us just a tiny bit in the direction of more equality of opportunity is an estate tax. It at least shows some sort of minimal commitment to the notion that those born with a silver spoon in their mouth might have some minimal responsibility to the rest of society.

What amuses me about opponents of the estate tax is that they are completely unable to see things except from the view of the deceased person. Yes, from the deceased person’s point-of-view, there are incentives to acquire wealth to pass on to your kids. (Although I always remember the admonition of a coworker who said something to the effect of “Giving your children a huge inheritance is about the cruelest thing you could possibly do to them.”)

However, from the point-of-view of the next generation, there is absolutely no justification whatsoever for advantaging some people over other people in this way. The estate tax is a compromise: It says, essentially, “Okay, in order to give people incentives to create wealth and share it with their future generations, we will essentially throw equality of opportunity under the bus, but we are going to require that a portion of the wealth gets transferred back to society to the benefit of everyone.” It sort of amazes me the extremism of people like you who find such a compromise so offensive.

I mean, we have pretty much made a laughing stock of your concept of the market awarding winners and losers. We have turned it into a lottery where those lucky enough to be born into wealth are the big winners and those into poverty are the big losers. And yet, it is still not enough to satisfy you if it is not possible for the rich to pass on every cent to the heirs that have done absolutely nothing to deserve it. They haven’t been awarded by the market; they have been awarded for being lucky enough to be born to the right parents.

91

Seriously? A “human right”? Would you please explain how inheritance is a human right.

92

The part I don’t get is the complaints about it being “double taxation”. There’s not one single dollar in the entire economy that has only been taxed once. Back-of-the-envelope estimate, it’s much more typical for money to be taxed about 50 times. Every transfer of wealth from anyone to anyone else is taxed. If I work at my job and earn money, I get taxed on it. If I then use some of that money to hire someone else to do something, they get taxed on it, too, even though that money has already been taxed. Why? Because it’s changed hands. Yeah, it’s my money to do with as I please, but almost anything I please to do with it will involve it being taxed again. Why should that not also be the case, if what I please to do with it is to leave it to my heirs?

93

In Canada, we don’t have an estate tax. Instead, the inheritors of the estate pay income tax on the money at their current tax rate (with lots of exemptions for the first X amount, a family home, etc). Since the top marginal rate in Canada is 29%, it would seem that if the American estate tax goes to 55%, Canada will have a significant advantage. Fine with me. Millionaires and their businesses are welcome here.

Our system seems superior anyway, because it puts the responsibility for the payment on the recipients, rather than having to hire lawyers to administer an estate. Also, it acts as an incentive for wealthy people to leave more of their money to the poorest family members or to charity. Give your money to a tax-exempt organization, and no tax is collected at all. A LOT of wealthy Canadians donate their estates to schools, parks, museums, etc.

But here’s what I would be worried about if I were an American - forget the social justice angle for a minute, and consider the effect on sole proprietorships. Let’s say I’ve built up a medium-sized business making specialty products. I’ve grown the business to $20 million in value based on its annual sales, inventory, fixed assets, etc. My actual salary from that business might only be $100,000 per year or something, and I have most of my actual cash invested in the business to grow it. When my kids came of age, they came to work in the family business, and by the time I die they know it inside and out.

Now, I die. The government comes along, and taxes my company at 55% of $15 million after my $5 million deduction. They hand a bill to my kids for 8.25 million dollars. The kids have to go out and take out a loan to pay the tax bill, and this becomes a new cost burden on the company, which either causes it to fail or to not be able to finance new growth. If it fails, the community loses jobs, people go on unemployment, the government loses the annual tax revenue my company created.

Not being all that familiar with American estate tax law, let me ask: Is this a possible scenario? Or is there something in the estate tax that would prevent this from happening? Bear in mind that a lot of small businesses are under-capitalized and often barely manage to make payroll. There’s a lot of $20 million companies that could not survive a sudden $8.5 million liability. Do you really want to destroy companies and jobs this way? Especially if the estate tax isn’t generating much in revenue anyway?

It’s easy for a small business to be worth a lot of money on paper, and yet not generate much in the way of profit. Typically, you’d value a company by looking at the present value of its fixed assets, the real estate value of the buildings and land, then a formula based on revenue and profit. Take a typical family-owned business like a car dealership - if it’s situated on a busy road, it could easily be on a lot worth several million dollars, and have a showroom building worth another few million. The repair shop could have hundreds of thousands or even millions of dollars worth of diagnostic equipment, power tools, lifts, etc. A typical car dealership might have $15 million in inventory. All told, it’s not hard to get a dealership that isn’t carrying a lot of debt to a paper value of $20 million, and yet that dealership may only be generating an operating profit after payroll and taxes of a couple of hundred thousand dollars. Those are the kinds of businesses I’d worry about being hammered by the government.

But perhaps even more to the point, if the owners know the government is going to hammer them and set up a situation where their family will probably not be able to continue running it, they may choose to keep more of the money rather than re-invest it in expansion and job creation, or they may sell the business early and blow the money, or perhaps not go into business in the first place.

You have to consider the disincentive effects of taxes - it’s easy to justify a tax if all you consider is how much money you will collect on a straight accounting calculation. It becomes harder when you start to consider how people will respond to the incentives the tax creates. The luxury tax was supposed to generate hundreds of billions for the government, but it cost money and ultimately had to be repealed. Incentives matter.

94

You don’t have a right to an inheritance, but the owner of the estate has a right to own property, which gives him the right to dispose of it as he wishes. The right to own property is one of the most fundamental rights you can have, because without it you are at the mercy of the state.

95

Sam Stone, why would the business owner make it a sole proprietorship? If he trusts his kids enough to leave it to them, why not make them co-owners while he’s still alive? And if he doesn’t trust them that much, why is he leaving them anything?

And I’ll agree that the owner has the right to dispose of his property as he wishes, but any way he does so, there will be tax involved. If he buys a bunch of stuff with it, he’ll pay sales taxes. If he hires people, they’ll pay income tax. If he gives it away, there will be gift taxes. Again, why should leaving it to his heirs be any different?

96

In the US, the business is incorporated with shares. The ownership of the business is determined by who owns those shares. If your kids really are participating (or you just want them to have an ownership interest), then you transfer shares to them. Typically this is done over several years because the shares are income to the kids. If there are still shares in your name at the time that you die, only the value of those shares are available to be ‘inherited’ or taxed because the kids are already part owners in the business. I’ve known several people who have transferred entire companies this way and at the point of their death, they didn’t actually have any ownership interest in the business or farm.

Now, on the other hand, if you can’t trust your kids to not destroy the business while you’re alive and don’t trust giving them part ownership of the business, then it would be like what you posted above.

I know of a family in my area where a man built two very successful businesses over the course of 50 years. Both were nationally known in their industry and were kind of famous. The man transferred one business to each kid like the above so there was no taxation involved. Wham, there you go, nationally known business worth millions. Both businesses were in default not even a decade later. Both kids (despite working in the businesses all their lives) were more interested in their social status and how they could bully the locals than in running a good business. The products for both businesses became synonymous with over priced cheap sh*t (falling from reputations for THE PRODUCT TO BUY FOR QUALITY). So, honestly, from the workers point of view, it would have been far better had those businesses been sold to REAL business people interested in staying in business instead of having been given to two guys who liked to chase tail around the county and spend their time schmoozing politicians for government hand outs.

97

I didn’t say the business was incorporated. Most small businesses are not incorporated.

And yes, given years of planning and lots of time and foresight, I’m sure the business could be structured so that the kids are owners by the time the parent dies, avoiding the estate tax. But the fact is, people die unexpectedly. Maybe the owner was planning to transfer the business to the kids as you say when he retired, then dies of a heart attack at age 50 before all those plans are in place.

And of course, one of the arguments against an estate tax is precisely that it distorts the economy by forcing people to do things like that not because it’s in the best interest of the business or the local economy, but because they need to do it to avoid the tax. Another obvious way to avoid it is to simply stop investing in your business at a certain age, or to sell your business and take your profits and blow it on vacations and nice cars. Behavior driven by tax implications, and not sound business planning.

98

Even though we shouldn’t really be focused on budget balancing now (at least without a short run fiscal stimulus as interest rates are up against the zero lower bound) I saw that there may be a budget deal in place with increased revenue coming from the Estate tax. Perhaps Republicans can support the “Death tax” above all other taxes???

99

Which is why I explained actions the heirs could take to ensure they would get maximum bucks–before Old Moneybags kicked the bucket. If somebody who became a multimillionaire had been fearful of lawyers & accountants all his life (although it’s hard to understand how he’d dealt with the “Life Taxes”) & then died alone after suffering years of dementia, why should any hers who suddenly appear get more than the 5 million dollar pittance? The heirs should have been around caring for the old guy–which, at that income level, means hiring competent professionals, not changing diapers. Out of self interest, even if they hated him…

100

I thought you were proposing a general “what if” question about US taxes. In the US, most businesses are incorporated (that is not the same as publicly trade, just incorporated). People tend to do that because the business then acts as its own ‘individual’. For example, if I need to buy a $100k piece of equipment on credit, the business would take on that debt, not “me” the individual. Also, a lot of industries require specific insurances that are not possible for Mr and Mrs John Doe because the insurances are for liabilities related to a business and the insurers want a defined entity with defined business model or they won’t provide coverage. To be clear, you certainly do not HAVE to incorporate, especially if your business isn’t very complex or is in an unregulated industry. But many people do incorporate because it makes bidding, insurance, employees, etc easier and creates a clear delineation between Mr John Doe and John Doe Industries.

I believe that in the US a small business is up to 500 employees. If you counted all the businesses in the US that qualify as small business, I’m guessing that the majority would be incorporated.

I have never ever heard of estate taxes discussed as a primary reason to incorporate. Usually, businesses incorporate long before that is even thought of for other business reasons like some of the ones I’ve listed above. The only time I’ve even heard it come close is with incorporating family farms. That is usually done for liability purposes at the point that you need outside labor on a routine basis or that you start providing products to someone beyond the local grainery. Again, the driving force to incorporate there is typically for liability purposes, but with a farmer the added benefit is that they can transfer the farm tax free to their children.

Anyone can do that as a sole proprietor or as a stock holder in an incorporated business. Again, it would be the odd duck that did that because of estate taxes. I would hope that they’d do that because they’d earned the right to go and blow it all. I’ve knew a guy who sold his thriving business and sank the money into a bar on a beach, then outfitted the place with every toy he’d ever imagined. So, he didn’t really pay any taxes because he sank all his profits into starting a new ‘business’ that paid him a very good annual ‘salary’.

Um… we have a great example of tax driven behavior in Romney. I really don’t think he’s complaining too much about it if you forced him to be truly honest.